Core views
In 2020, Yuanda Housing & Construction (02163) focused on developing the 2C business through a strategic transformation of ToB+ to C two-wheel drive. By analyzing the policy environment of the rural housing market, the situation of country house competitors, the company's 2C product advantages, marketing models, etc., we believe that the 2C business will open up a new growth pole for the company.
Homestead system reform activates trillion-dollar space in the rural self-built housing market
According to the “White Paper on Consumption Data and Development of China's Rural Self-built Housing Industry”, which predicts demand in the rural market, about 5 million farm houses are built or reconstructed every year in China. We predict that by organizing homesteads in the next 5-10 years, a market capacity of 5 trillion yuan (129,000 yuan/household* 1.02 million households* 1.02 million households+92,000 yuan/household* 28.54 million households) will eventually be formed in terms of housing construction for landless farmers. Based on ten years, the average rural housing market size will be about 500 billion yuan per year.
Each competitor in the townhouse market has advantages in the field of segmentation
We selected 4 representative townhouse enterprises for comparative analysis. Among them, Baojia Township Villa and Yuanshujia are traditional enterprises, while Villa Factory and Huachuang Meijia are prefabricated construction enterprises. In terms of common advantages, they all have the characteristics of standardized product assembly and delivery, a complete supply chain system, and delivery methods that do not require advance funding. The four enterprises have their own competitive advantages in segmented fields. For example, Baojiaxiangshu has developed the richest and most diverse townhouse products in the industry with its design strength; Yuanshujia introduced the aluminum mold process into the traditional structural system of Shuxiang for the first time, greatly improving the construction speed and quality of traditional concrete structures; the villa factory is the first townhouse enterprise to make heavy steel structures, which have advantages such as fast construction speed of steel structures, good environmental effects, and labor cost savings; Huachuang Meijia uses fully bolted prefabricated concrete structures (BPC), which has a high degree of industrialization and less on-site casting Labor, even more Environmentally friendly.
A new generation of Yuanda beauty products has been released, and the scale is expected to grow rapidly
In 2020, the company focused on developing the C-side business and established the B2C Module Integration Technology Division, which is mainly responsible for Yuanda Meijiao and the new product B-BOX. Among them, Yuanda Meijiao products mainly target C-end consumers and target the country house market. Five standardized products have been sold this year. We believe that in addition to having the advantages of other representative townhouse enterprises, Yuanda Meizhai also has competitive advantages in terms of intelligent manufacturing, factory layout, construction speed, technical level, and customer types. It is expected that the company will develop rapidly in the prefabricated townhouse segment. In the future, the product type design can satisfy the entire market. In the long run, it is expected that the scale will not be lower than the 2B business. We predict that the company's 2C business scale (excluding B-BOX) will reach 5.25 billion yuan in the next 3 years, providing the company with considerable performance growth.
Pioneering an online and offline Internet+ marketing model
Currently, Yuanda Meizai uses a marketing model that combines offline 4S stores and online Meizai Cloud Generation. Among them, offline 4S stores take advantage of “experiential marketing” and combine the characteristics of 4S dealers with rich local resources to efficiently accelerate the process of penetrating Yuanda Meimei Real Estate products into the local market; Meizhai Cloud creates an online business agent mechanism with functions such as recommendation, sales, and rebates, and is suitable for scattered housing construction customer groups, similar to the emerging UGC content+social marketing model in the era of big data, breaking the early transmission relationship in the marketing communication process. We believe that the combined marketing model of the two will facilitate the rapid promotion of YuandaMei Real Estate products in the future.
B-BOX creates high-end residential space products, and domestic and overseas markets develop in parallel
B-BOX products newly developed in 2020 use high-tech silicon-based composites. The material strength is 5 times higher than that of ordinary concrete, and the structural weight is lighter than water, making it easy to transport. In terms of product positioning, it can be used in country houses, tourist resorts, creative office space, beautiful rural construction, ecological cultural tourism towns, coffee shops, bookstores, etc. Currently, domestic and foreign markets are developing in parallel, and it is expected to become another heavyweight product in rural or overseas regions in the future.
Investment advice
We expect that Yuanda Meizhai will have a lot of room for growth. In the future, product type design can satisfy the entire market. At the same time, the new product B-BOX may become another heavyweight product in rural or overseas regions in the future. In the long run, the 2C business scale is expected to be no less than the 2B business. Moreover, from the perspective of business management, the 2C business has better controllability and guarantees better cash flow and receivables. Considering that the 2C business will greatly boost the company's performance in the future, we adjusted the 2020-2022 EPS from 1.81, 2.17, and 2.60 yuan/share to 1.81, 2.37, and 3.30 yuan/share, giving the company a 2020 valuation of 19.86 times PE. The target price is 35.96 yuan (corresponding to HK$41.09), maintaining the “buy” rating.
Risk warning
State-owned enterprises entered the prefabricated field to compete with the company; the reform of the homestead system fell short of expectations; promotion of Yuanda Meimei's housing business was blocked; and B-BOX's overseas business was blocked due to public health incidents.
body
Due to a shortage of labor and stricter environmental protection, prefabricated buildings have developed rapidly under the impetus of policies. Considering factors such as living comfort and construction costs, China has formed a market pattern dominated by prefabricated concrete (PC) structures and supplemented by steel structures. Among them, PC structures accounted for 65% of newly built prefabricated buildings in 2019, thus driving the rapid development of the PC market. With more than 20 years of technological innovation, R&D capabilities, and data system standards, etc., Yuanda Housing Engineering has gradually increased project orders from B-side agencies such as real estate developers and general contractors. Based on 2018 revenue, the company is the largest PC component manufacturer in China, with a market share of 13.0%. At present, the company's 2B business is basically mature and has achieved steady growth.
As rural collective land use and homesteads are encouraged by national policies and requirements for liquidity and asset revitalization, the company began to focus on developing 2C business in 2020, set up a B2C module integration technology division, and entered the country house field with B-house (B-house) business and the new product B-BOX business. By analyzing the policy environment of the rural housing market, the situation of country house competitors, the company's 2C product advantages, marketing model, etc., we believe that Yuanda Mei Housing and the new product B-BOX will bring new performance growth to the company.
1. The rural self-built housing market space is vast, and prefabricated buildings have great potential
1.1. Homestead system reform invigorates rural self-built housing market space
Since the 18th National Congress, China's rural land policy has focused on “three plots of land.” “Three plots of land” refers to rural land, land for collective management construction, and homesteads. Reforms involving “three plots of land” include the three aspects of “rural land expropriation, entry of land for collective management construction into the market, and reform of the homestead system.” Among them, the reform of the homestead system has had an important impact on rural demand for self-built housing.
According to estimates from the “White Paper on Consumption Data and Development of China's Rural Self-built Housing Industry”, China has 690,000 administrative villages, and 10 new households are built in each village. About 5 million farm houses are built or rebuilt every year in China.
We are in “Tianfeng Construction Land Reform Series 1: This round of land reform will significantly increase the capacity of the construction market” (https://w.url.cn/s/AgvahpK)中指出此轮土改将显著增加农村住房市场容量). We believe that the “paid exit of homesteads”, which has been strongly emphasized by the state in recent years, can activate the resettlement housing construction demand created by the resettlement of withdrawn farmers. Furthermore, the new version of the Land Management Law has also added regulations on household ownership. We believe that the new regulations on household ownership will also activate some demand in the construction market.
According to our estimates, by organizing homesteads in the next 5-10 years, a market capacity of 5 trillion yuan (129,000 yuan/household* 1.02 million households/household* 1.02 million households+92,000 yuan/household*28.54 million households) can eventually be formed in terms of housing construction for landless farmers. On a ten-year basis, the average rural housing market size is about 500 billion yuan per year.
1.2. Country houses ushered in development opportunities
With the stimulus of policies such as the paid exit mechanism for homesteads and the housing system, the market for newly built housing in rural areas will be large in the future. Judging from the quality of housing, high-end country houses have shown a continuous growth trend among self-built houses in rural areas in recent years. We think the main reasons are as follows:
1) Improvement of the quality of life in rural areas. Today's rural, economic, and living conditions have greatly improved in all aspects. Modern farmers are also constantly improving in their mentality and education; they have more time and opportunities to work outside the home. As the economy improves, so do their requirements for quality of life. According to the standards for livable farm houses with modern functions, local appearance, cost economy, structural safety, and green environmental protection, and the housing logic of healthy housing in the post-public health incident era, the demand for high-quality rural housing products will increase.
2) Consumers have strong purchasing power, and most have homesteads. Currently, there are three main types of customer groups in the townhouse market. The first type of customers is a high-income group working in the city, and also has a homestead in their hometown. In the future, people who want to use a homestead or parents who want to live in the countryside and have reconstruction needs. Currently, such customers occupy the mainstream in the townhouse market; the second category of customers is urban people who have no homestead but pursue an idyllic rural lifestyle. The second category of customers is connected with land information platforms through professional institutions to provide such customers with land information and demand, thus realizing the vision of this type of customer to build a leisure holiday villa in the countryside.
3) Enterprise customers have great demand for cultural tourism development. The third category of customers is enterprises that plan to do projects such as clubs, homestays, and old-age care in rural areas. Companies can expand with resource advantages. The concept of leisure agriculture has been around for a long time, but in the past, leisure agriculture mostly focused on agricultural tourism and farmhouses, with a single function and a low level. Nowadays, leisure agriculture is no longer satisfied with farmhouses with the content of “staying in a farmhouse, eating farmhouse meals, doing farm work, and enjoying a farmhouse.” While developing agricultural leisure tourism and farmhouses, it is also developing rural folk culture, farming culture, and ecocultural resources, adding leisure, entertainment, health, fitness, and return to nature content, thus enabling leisure agriculture to develop in a more commercialized and large-scale direction, attracting more commercial enterprises to lay out rural leisure tourism projects. These projects are well-funded and require high-quality redesign of buildings, and are expected to gradually drive the high-end country house construction market to start and develop rapidly. At the same time, rural land transferred to commercial development and use is rural land for collective construction. Compared with homesteads, which have relatively flexible jurisdiction over the target of use, area of use, and rental period, they account for a high proportion of land where country houses can be built in rural areas, and are an important part of the construction and development of country houses.
4) Residents' acceptance of rural houses is higher than that of urban commercial housing. In terms of age groups, middle-aged and elderly people are more receptive to country houses than young people. Due to the large number of young people now going out to work and work, it is quite common for families to have only the elderly. The elderly still prefer grounded country houses, while their fondness for commercial housing in the city is less favorable.
5) Judging from housing prices, compared to commercial housing in economically developed cities, the cost of country houses is much lower than that of commercial housing, mainly because land prices account for a high proportion of commercial housing prices in cities, while most villages have their own homesteads. Even when considering leasing land, land prices are much lower compared to cities.
Therefore, as policies stimulate self-built housing in rural areas and the continuous increase in market demand, many enterprises have entered the country house field one after another in recent years, allowing them to develop rapidly. Currently, the majority of participants are small businesses, and the market is scattered. According to the construction model, it can be divided into traditional enterprises and prefabricated construction enterprises. Currently, traditional enterprises are the main ones.
We selected 4 representative townhouse enterprises and the company YuandaMei Home for a comparative analysis. Among them, Baojia Township Villa and Yuanshu Family are traditional enterprises, while Villa Factory and Huachuang Meijia are prefabricated construction enterprises.
2. The main competitors in the market: flowers bloom in full bloom, each has its own merits
2.1. Baojia Township Villa: Outstanding design strength, leading high-end townhouse brand
Shenzhen Baojia Township Villa Technology Co., Ltd. is a leading brand of high-end townhouses in China. Baojia was born out of Baoxinyun Construction (stock code 831620), the first listed grade A design institute in the five central and southern provinces. It was formally established in February 2017, headquartered in Shenzhen, and has three divisions: Changsha, Hunan (R&D center), Wuxi, Jiangsu, and Hangzhou, Zhejiang.
In 2017, Baojia began building country houses, focusing on improving and improving the quality of life in rural residents, researching the needs of 60W+ people returning to their hometowns to build houses, forming a team of experts in planning, technology, and supply chain, integrating high-quality resources in the industrial chain, developing villa products specially suited to rural life scenarios, and adhering to high quality, standardization and overall delivery to enhance certainty.
At present, the Baojiaxiang villa project has covered 26 provinces, 191+ cities, and 1,900+ townships across the country, with a referral rate of 300% for owners under construction. Most of our clients are high-net-worth people in the city, such as business owners, professional managers, business executives, and professionals. Judging from the business distribution, the four regional projects of Hunan, Guangdong, Jiangxi, and Hubei predominate.
Outstanding design strength and rich product types. Baojia has a first-class design institute team, strong villa design and development capabilities, and hundreds of intellectual property patents. It has created more than 40 standardized villa products, forming A, C, E, and X grade products based on different scenarios. The appearance mainly includes Chinese style, European style, Haipai, Imperial style, etc., and the price of each set is 779-4.36 million yuan. Judging from the type of structure, all of Baojia's products use traditional brick-mixed structures or frame structures. Currently, A-grade products are relatively cost-effective, and customers have more choices.
In terms of product pricing, Baojia uses a unified national sales price. The total price takes into account geographical factors (by province), adjusts the overall structure according to regional differences (so that conditions such as earthquake resistance, insulation, and wind protection meet standards), and takes into account local price differences. The villa price calculation formula is as follows:
Villa prices in each region of the country = geographical coefficient × standard product price+foundation and ancillary project costs
The housing construction process is open and transparent, and there is no need to advance capital to build a house. Before the construction of the main structure starts, the customer is required to pay 60% of the total amount, and the remaining 40% before the renovation starts. As companies enter JD and Tmall, platform payments can be made, and the trust of most customers has increased.
Integrate high-quality resources in the industrial chain and reduce costs through large-scale procurement. Baojia has established strategic partnerships with leading enterprises in various segments to form a national supply chain for rural housing products. In addition, Baojia and strategic partners have also jointly launched four major systems to solve the four common problems in rural environments, including the overall solution for safe electricity use (Siemens), the overall solution for light sources for switch panels (Philips), the overall solution for waterproof and moisture protection (Dongfang Yuhong), and the overall lighting environment solution (Siyida).
Standardized products help Baojia's performance continue to reach new highs. Baojia sold only 21 buildings in 2017, mainly because of private customization in the early days, which affected the cost, construction period, and delivery results of the project, thereby hampering operating efficiency. By 2018, Baojia insisted on the overall delivery of standardized products, which significantly improved operating efficiency; in the same year, Baojia successfully settled in Jingdong, and the innovative Internet sales model started a new boom in online villa shopping. In 2018, it sold 476 buildings, with sales exceeding 500 million yuan. In 2019, it entered Tmall and further expanded its Internet platform layout, with annual sales exceeding 1.3 billion yuan. By the end of 2019, Baojia had sold a total of 1,200 villas.
In terms of sales channels, Baojia rationally uses resources, gives full play to its own construction quality advantages, and accumulates customers through direct and indirect dual channels to win performance growth. In terms of direct channels, Baojia operates advertising management for products on various platforms such as Today's Headline, WeChat MP, Guangdiantong, Baidu Native, etc., to guarantee the delivery of high-quality Internet information flows, while integrating community operations and user operation models, and establishing the Baojia Internet fan base through fission communication ideas.
In terms of indirect channels, Baojia focuses on the accumulation of word of mouth, long-term stable relationships with customers who have signed contracts, and the promotion of Baojia's construction quality through practical experience among family, friends, and townspeople. There is no need to attract customers on your own. With many types of product designs, which are beautiful and good-looking, and meet consumers' aesthetic needs, they have formed a certain influence within specific regions, reaching a spontaneous word-of-mouth transmission rate of 82%, a referral rate of 178% for owners under construction in 2019, and a referral rate of 300% for owners under construction in 2020. In addition, Baojia also attracted customers to join the enterprise as investors, set up the Rural Self-Built Housing Owners Committee, and received an investment of 35 million yuan from the current Industry Committee. Meanwhile, the old shareholder Zhongli Capital sought 50 million yuan.
In terms of project construction, Baojia currently has about 20,000 workers, belonging to the company's own construction team, which coordinates scheduling at any time; in terms of construction schedule, the construction period for Baojia villas is generally 6 months. If other force majeure factors such as bad weather are encountered, the construction period will be delayed.
2.2. Yuanshu Family: Introducing the aluminum mold process exclusively into the traditional structural system of townhouses for the first time
The predecessor of Yuanshujia's founding team was a construction enterprise that undertook the construction of government projects and large-scale buildings. He has participated in the construction of the Nanyue Biopharmaceutical Industrial Park, the Hunan Rail Transit Control Center, and the Shaw Building of Hunan University of Arts and Science. Among them, the Nanyue Biopharmaceutical Industrial Park won the highest award in the construction industry - the “Luban Award”. In 2017, Hunan Province was hit by massive floods. The founding team of Yuanshujia responded to the government's call and participated in flood relief and aid in the construction of more than 30 resettlement houses. It was later spread by word of mouth from villagers, and more than 80 townhouses were built one after another. At this point, it has begun to officially invest in the development of the country house design and construction market sector.
Since its establishment in 2016, Yuanshujia has relied on a solid industry foundation and construction capabilities while strictly screening high-quality materials to absorb scarce talents such as first-level builders, second-level builders, and senior assemblers. It has successfully established a complete standardized product sequence and a complete service process system, and developed into a townhouse brand with excellent team, efficient operation and high-quality products. So far, the business has covered Hunan, Guangdong, Hubei, Jiangxi, Henan and other places.
In terms of product system, through 4 years of intensive rural construction, Yuanshujia has now formed Y, S, and J series standardized products based on different scenarios. There are mainly new Chinese and Mediterranean styles to choose from, and the price of each set is 59.8-2.768 million yuan. In terms of structural types, at present, traditional brick-mixed structures are mainly used, as well as a small number of frame structures and pure concrete aluminum-cast structures. Currently, Y series products are relatively cost-effective, and customers have more choices.
Similar to Baojiaxiang Villa, the entire house in Yuanshu's hometown villa is fully furnished and delivered. The product uses a unified sales price throughout the country. The total price takes into account geographical factors and does not include foundation construction costs. The standard product price is based on factors such as product series (Y, S, and J three systems), geographical location, soil quality, and individual requirements selected for the project, and the full price is reported after confirming the requirements with the customer and completing on-site surveying and mapping. Customers are required to pay 60% of the total amount before the construction of the main structure starts, and pay the remaining 40% after capping and before the renovation enters the site. The company has already settled in JD and Tmall flagship stores, which can implement platform payments and enhance customer trust.
Yuanshujia has a complete supply chain system and has established strategic cooperation with many leading enterprises. By centrally procuring branded building materials through standardized products, the company has a certain bargaining power.
For the first time, the aluminum mold process was introduced into the traditional structural system of townhouses. In July 2020, Yuan Shujia signed a strategic cooperation agreement with China Construction Technology. Compared with traditional construction models, the aluminum mold process can effectively ensure that products of different projects meet uniform high quality standards, make it possible for interior and exterior walls to be free of plastering, and can also prevent drumming and cracking caused by traditional plastering processes, and minimize the risk of leakage.
In terms of construction period, the main construction period of the company's traditional brick-mixed structure is generally 3-6 months, but using pure concrete aluminum molds, the main body only takes one month to complete, significantly shortening the construction period. Using the aluminum mold process, the normal construction of a set of templates can reach one floor in four days. It only takes one month for the main building to be completed, and assembly line construction can be carried out better, greatly shortening the construction cycle, and making construction management more standardized. All materials in the aluminum formwork system are renewable materials and meet national regulations on energy efficiency, environmental protection, low carbon, and emission reduction for construction projects. Furthermore, all parts of the aluminum formwork system can be reused. After construction and removal, there is no garbage on site. The support system is simple in structure and easy to remove, and the entire construction environment is safe, clean and tidy. Clear water concrete is poured to achieve the wall surface effect that can be moved in without decoration; the whole house is insulated, zero cracking, zero water leakage, and the quality meets civil protection standards.
2.3. Villa factory: a pioneer in prefabricated heavy steel structures
Villa Factory was founded in August 2015 and is a website brand owned by Hunan Sentai Construction Technology Co., Ltd. The brand focuses on one-stop services for new rural villa design and villa interior decoration design, landscape design and construction. Currently, the business is two-wheel drive, that is, “high-end townhouse custom design” and “prefabricated heavy steel townhouse assembly and delivery”, with annual sales reaching hundreds of millions of yuan.
The complete products delivered by the villa factory include grade A and grade C series. Most of them are grade A products. They all use heavy steel structures, and the price of a single set is 568,000 to 3,088,000 yuan. At present, the company has settled in JD and Tmall flagship stores, which can implement platform payments and enhance customer trust.
Like other townhouse products, villa factory products use a unified price throughout the country. The total price takes into account geographical factors (by province), and is adjusted according to the overall structure of geographical differences (so that conditions such as earthquake resistance, insulation, and wind protection meet standards), not including foundation and ancillary project costs. Before the construction of the main structure starts, the customer is required to pay 60% of the total amount, and after capping, pay 35% and 5% of the warranty deposit before the renovation. Currently, the companies have all settled in JD and Tmall, and can make platform payments.
The villa factory has established strategic brand partnerships with leading enterprises in various segments and formed a strong product supply chain in the rural villa sector. The product system covers all stages of main materials and auxiliary materials such as civil construction, exterior walls, interior, garden landscape, and soft decoration.
The heavy steel structure of the villa factory has the following advantages:
1) The main frame of the heavy steel villa uses international steel structure materials. The steel content per square meter is over 50 kg. Compared with traditional light steel materials, the steel content is 30% higher than that of traditional light steel materials, reaching earthquake resistance level 9 and wind resistance level 13, making it safer and more reliable to cope with extreme weather and natural disasters; compared with traditional brick-mixed structure buildings, the service life is increased by more than 30%.
2) Fast construction, saving labor costs. Factory manufacturing, on-site assembly, delivery time is about 90 days, which is more than 50% shorter than traditional construction models; in terms of labor consumption, steel structures are reduced by 2/3 compared to traditional buildings.
3) The environmental effect is good. The amount of sand, stone, and ash used during the construction of steel-structured houses is greatly reduced. The materials used are mainly green, 100% recycled or degradable materials. When buildings are demolished, most materials can be reused or degraded, and will not cause garbage.
4) Meet the requirements of housing industrialization and sustainable development. The steel structure is suitable for mass production in factories, has a high degree of industrialization, and can integrate finished products such as energy efficiency, waterproofing, insulation, doors and windows, etc., and complete applications, integrate design, production, and construction, and raise the level of the construction industry.
2.4. Huachuang Meizai: Prefabricated BPC Technology Serves Rural Markets
Huachuang Meijia is a brand owned by the private enterprise Beijing Construction Engineering Huachuang. It specializes in country villas and serves the rural market. Beijing Construction Engineering Huachuang was founded in 1997 and is a national high-tech enterprise. It was listed on the New Third Board in 2007. It is a prefabricated construction technology provider, prefabricated component manufacturer, and prefabricated construction service provider. The company developed the first in the country and pioneered market-based full-bolt concrete prefabricated (BPC) construction technology and technology, and conducted comprehensive and in-depth research on low-rise construction technology. The scope of research covers the entire process from design, component production to construction, forming a building system with its own intellectual property rights and various patented technologies, and designing an automated production line with an annual production capacity of more than 300,000 square meters of construction components.
Construction Engineering Huachuang quickly replicates and promotes BPC technology through a franchise cooperation model, and is committed to building a full-industry chain technology system and industry-university-research base. At present, business cooperation has been carried out in 18 provinces, cities and regions across the country. In addition, there are international collaborations such as Manila in the Philippines and South Korea.
Products meet individual needs on the basis of standardization. The JD flagship store shows that the 11 types of housing products include 1-3 story country houses, single-family buildings, and courtyard buildings. The hardcover delivery price starts at 388,000 yuan to 2.18 million yuan. There is no need to calculate according to geographical factors; the total price includes hard ground. The main construction takes only 15 days to complete, and 60 days for hardcover delivery. Before the construction of the main structure starts, the customer must pay 60% of the total amount, and after capping, pay 40% of the balance before the renovation. Huachuang Industrial's revenue in 2019 was 17.16 million yuan. Assuming that the share of other businesses is not taken into account, based on the average price of a single set of 800,000 yuan, we expect sales volume in 2019 to be around 21 units. Currently, the volume is still small.
On the basis of standardized component size modulus combinations, users can DIY design the apartment type, area, interior and exterior decoration, equipment selection, etc. according to personalized needs. Through different combinations and combinations, the floor layout of the building can be simple and varied to meet the changing individual needs, and the price is priced according to private customization.
The fully bolted prefabricated concrete structure housing system (BPC) is a new type of prefabricated concrete structure. It is composed of components such as prefabricated wall panels, wall columns, cushions, door and window frames, prestressed floor panels, roof panels, etc. The prefabricated wall panels are composed of two layers of concrete panels and 100mm thick fireproof insulation material sandwiched between them. The prestressed floor slab (roof panel) consists of several standard sections of precast concrete slabs connected by prestressed steel bars.
All prefabricated components are divided into 4 categories and 24 modules to form a complete standard series, and the building system is manufactured in the factory, prefabricated, and bolted after delivery to the site. The assembly rate is greater than 95%. Through human-robot collaboration, the main body of a 300m² building can be completed in 5-7 days, greatly saving labor costs. Furthermore, optimized structural design and application of lightweight material technology have reduced the weight of panels by more than 40% compared to traditional products, reducing transportation costs.
In addition, CCG Huachuang plans to jointly establish distributed industrial bases such as prefabricated construction industry center factories and satellite factories, etc., seeking to use their respective advantages to invest in space, equipment, manpower, and local resources, etc., and jointly create a new BPC green building business format throughout the industry chain to form a unified market price and management of BPC components. Among them, the central factory is a full-component factory with a service radius of 300-500 kilometers; the satellite factory is a high-frequency component factory with a service radius of 50-100 kilometers. Currently, Construction Engineering Huachuang has five factories across the country, located in Hebei, Hainan, Jiangsu, Henan, and Korla, Xinjiang. Among them, the Hebei factory is the company's shareholder, and the Hainan plant is owned by the company.
2.5 Competitive advantage analysis
Through studying the above 4 townhouse enterprises, we found that they have their own advantages in different fields. Among them, Baojiaxiangshu has developed the richest and most diverse townhouse products in the industry with its design capabilities, which are very popular with consumers. The transformation from the initial private customization strategy to only standardized product delivery has significantly improved operating efficiency; Yuanshujia's founding team has a large-scale engineering construction background. In order to apply the aluminum mold process to low-rise villas more economically, the aluminum mold process was first introduced into the traditional structure system of townhouses, which greatly increased the construction speed; the villa factory was the first townhouse enterprise to make heavy steel structures, with advantages such as fast steel structure construction speed, good environmental effects, and labor cost savings. However, the heavy steel structure is similar to a frame structure, and the comfort of living is similar to that of a concrete structure, and its performance in terms of waterproofing, moisture resistance, sound insulation, and insulation far exceeds that of light steel structures; Huachuang Meijia uses a fully bolted prefabricated concrete structure (BPC), which is a new type of prefabricated concrete structure with outstanding advantages in terms of construction speed and employment. In addition, BPC uses fully dry connections, fewer cast-in-place construction sites, and is more environmentally friendly.
At the same time, the four townhouse enterprises also have common advantages, mainly as follows:
1) Standardized product delivery: All four companies use standardized product delivery. Among them, the villa factory has some custom design services, but it still mainly focuses on standardized products. We believe that standardized products will be the future trend. Their biggest feature is that they can be replicated on a large scale, which can reduce the cost of batch procurement of raw materials, the level of on-site construction will also become more skilled, and the quality, safety and reliability of housing. However, privately customized products will inevitably cause material waste, construction schedule delays, etc. due to customer design modifications, etc., which hinders operating efficiency. In terms of assembly delivery, with the collaboration of all links in the entire industry chain, such as design, construction, and decoration, well-managed enterprises can reduce costs and increase efficiency, further improving profitability.
2) Complete supply chain system: All four enterprises have established strategic partnerships with segmented brand building materials, forming a national supply chain for rural housing products. Brand building materials are procured centrally through standardized products. Under the same quality and configuration, the cost of building on the owners' own construction is significantly reduced.
3) Delivery methods do not require advance funding: In traditional engineering construction, the contracting unit needs to advance funds before the overall delivery, which may drag down project repayment due to factors such as delays in the construction schedule, and even the possibility of bad debts. For private enterprises with small capital, the operating risk is high. However, townhouse products do not require advance capital, and consumers pay in advance per node without taking up the company's cash flow. It is an asset-light model that does not hinder enterprises from expanding their business scale due to capital problems, and is more suitable for the business development of private enterprises.
3. B-house's grand house: ready to go
With the implementation of the New Land Law on January 1, 2020 and the introduction of Central Committee Document No. 1 in 2020, rural collective land can be directly entered into the market. The rural housing market has ushered in a new market space, and modular and prefabricated buildings will have great potential. Through the strategic transformation of To B+ To C two-wheel drive, Yuanda Housing works to improve the quality and upgrade of rural habitats. The 2C business consists of B-House Grand Beauty and the new product B-box. Among them, B-house products mainly target C-end consumers and target the country house market; using the online and offline “Internet +” model, through the establishment of an information platform system, combined with self-operated and joint factories with a nationwide layout, it provides one-stop industrialized, fully equipped rural high-end housing services for production, sales, installation and after-sales services.
3.1. Yuanda Meizhai's new product is on the market, and there is broad scope for future development
As early as 2015, Yuanda Housing tried the first generation B-house Grand Home, but due to the small market space at the time, too scattered business, and inadequate company layout and service, etc., the country house project was put on hold for a short time, but it still focused on technical research and development of 2C products during this period. By 2020, as rural collective land use and homesteads are encouraged by national policies and demand for liquidity and asset revitalization, the company will seize new opportunities and bring a new generation of B-house luxury homes to the townhouse market.
In 2020, a total of 5 new products were released, namely Wutongmei County, Oak Manor, Hibiscus Manor, Camphor County, and Versailles. Depending on the type of product, the living area was 238 square meters to 808 square meters, and the price for a single set was 88—3.98 million yuan. All were standardized and delivered, and the price was unified throughout the country, not including foundations and ancillary projects. Compared to traditional townhouses, B-house products do not need to calculate geographical factors, mainly because the products all use a fully assembled precast concrete structure system. All of its main bodies are prefabricated in the factory, then connected by high-strength bolts on site, without any cast-in-place casting. A grand and beautiful house can complete the main structure in 2 days as soon as possible, and achieve overall hardcover delivery in 60 days, greatly satisfying the practicality and comfort of living and promoting energy saving, environmental protection and sustainable development of the building. Currently, the company has settled in JD and Tmall flagship stores, and can make platform payments.
Furthermore, the townhouse industry does not require advance capital to build a house, and does not take up the company's cash flow. Before the construction of the main structure starts, the customer is required to pay 60% of the total amount, and after capping, another 40% of the balance before renovation.
Yuanda Meijia creates a high-quality living environment for customers in terms of product design, apartment layout, and hardcover style. Take the Oak Manor model house as an example. Oak Manor covers an area of 169 square meters and a sales area of 325 square meters. It has a total of two floors. The functional layout is 5 bedrooms, 4 living rooms, 3 bathrooms, 1 kitchen, 1 laundry room, 2 balconies, simple atmosphere, and clear space planning.
1) The first layer focuses on “social+function”, which is convenient and practical. The entrance hall has been nicely converted between the main door and living room; the dining room, kitchen, and laundry room are fully connected and located on the other side of the living room; considering that elderly parents have easy access and love for cleanliness, the parents' room is in one corner, close to the public bathroom.
2) The second floor is positioned as “living+leisure”, warm and private. The compact living room cleverly connects the 4 bedrooms; according to customer needs, the empty part can be built on its own to expand the living room; the highlight of the second floor is the extremely private master bedroom, with a separate bathroom, cloakroom, and terrace, all of which exude a sense of comfort.
The functional division of the product is reasonable, modern, simple and hardcover:
1) Living room: The double floor is high, the apartment is transparent, the space is more spacious and spacious, and the dining room is connected to the living room.
2) Multi-function hall: Connected to the living room, it can be arranged as a tea room, chess and card room or gym according to user preferences; direct access to the outdoor sliding door, which integrates indoor and outdoor spaces, indoor recreation, outdoor play and BBQ, and enjoy a variety of ways to relax at home and enjoy high-quality outdoor dining needs.
3) Kitchen: In addition to functional cabinets, it is also equipped with a set of 3.8-meter-long tall cabinets to ensure sufficient storage space. The Nakajima bar in the center can be used to prepare meals, eat, drink, chat, etc.; the storage laundry room is close to the kitchen and has a separate entrance. Grocery shopping and food waste can be directly entered and exited through the back door, so it does not disturb the family or stain the interior.
4) Master bedroom: Enjoy a large space of about 50 square meters, including a cloakroom, a 9㎡ separate bathroom (1.6m sink, shower and bathtub), and a large 4.7m x 2m terrace directly connected to the outside, combining comfort and privacy.
5) Double terrace: The double terrace configuration provides a sense of open space, so you can extend your leisure life indefinitely without leaving your home and enjoy a relaxing and relaxing time.
Furthermore, Yuanda Meizhai strictly controls process methods and reduces construction errors to the millimeter level. It has the following advantages:
1) Better quality: The main process uses a fully prefabricated and fully assembled concrete structural system, which is equivalent to cast-in-place but superior to cast-in-place. The prefabricated components are connected by bolts using pre-embedded connection boxes, and the seismic intensity can reach 8 degrees or more. The exterior wall finish and wall are press-molded once in the factory, so there is no need for on-site tiling, so it is durable, safe and shockproof.
2) Good insulation and moisture resistance: The foundation construction is equipped with a geotechnical moisture-proof film, and an overhead insulation prefabricated partition is used on top to insulate moisture; the wall uses a sandwich wall with sandwich structure, which has the advantages of insulation, noise isolation, and good waterproof performance; the outer wall and floor are double waterproof with structure+material to further enhance moisture resistance; the roof uses a light steel slope roof design, truss factory pre-assembly, and sandwich floor panels are used as materials. Sandwich insulation exterior wall panels, with 60mm thick EPS insulation material sandwiched between 160mm thick wall panel components and 250mm thick floor slab components, reducing the heat transfer coefficient of the wall. The floor is 300mm thick and is partitioned with 200mm thick EPS insulation material to meet roof insulation requirements. The three-layer insulating glass doors and windows greatly reduce the heat transfer coefficient.
3) Good noise reduction and sound insulation effect: The doors and windows are designed with double glazing to improve the sound insulation effect; the unique silent drainage pipe technology enhances the overall noise reduction function and drainage capacity.
4) Meet diverse needs: The interior is prefabricated, and the space is flexible and variable, and the room layout can be changed according to consumer needs.
5) Focus on the functional attributes of space and improve space utilization: The overall housing optimizes beam height, pre-embedded pipelines, and increases net height.
6) Fast construction speed: The overall delivery time is about 2 months, the main structure is completed in 2 days as soon as possible, and you can enjoy the main service of the lifetime warranty structure.
We believe that the promotion and development of Grand Beautiful Homes in the future depends on consumer acceptance. As a new process, the fully assembled precast concrete structure system is expected to require a certain amount of time for inspection in the short term. After reaching a high level of market acceptance, it is expected that the company will further expand production capacity. The design style, appearance, and apartment type of the product are aspects that consumers focus on. We believe that as Yuanda Meijiao's products gradually become richer and design styles become more diverse, it will further enhance the consumer's sense of experience and attract a large number of people to buy beautiful homes. In order to strengthen B-house's publicity work, the company has now set up 6 major exhibition halls, which are located in Hunan, Hubei, Shandong, Tianjin, Henan and Anhui.
According to data from B-House Yuanda Meijia's public account, in the model house collection campaign of less than two months, we expect more than 100 people to order. The discounted price for Wutong Meijun is 650,000 yuan, and the discounted price for Oak Manor is 950,000 yuan. We calculated the average price of 750,000 yuan, and the revenue from the 100 subscription business is 75 million yuan. In less than two months, without much publicity, we think we can achieve such impressive sales performance. We expect that Yuanda Meijiao will have broad room for development in the future.
3.2. Analysis of the competitive advantages of Yuanda Meijiao
Like representative enterprises in the rural villa sector, Yuanda Meizhai also has advantages such as standardized product assembly and delivery, a complete supply chain system, and delivery methods that require no advance capital. Furthermore, we believe that Yuanda Meizhai also has competitive advantages in the following areas, and Yuanda Meizhai is expected to lead the industry in the short term.
1) Leaders in construction industrialization
Yuanda Housing Engineering is the first company in China's prefabricated construction industry to fully utilize a full-process digital informatization system. It is also the first enterprise with a full-process technology system with exclusive intellectual property rights. It provides global, large-scale, specialized and intelligent prefabricated construction manufacturing and services, and is a practitioner of China's construction industrialization.
Currently, China is facing a shortage of labor and stricter environmental protection. Compared with traditional cast-in-place construction, prefabricated construction is a model that can achieve green environmental protection, improve construction quality, and accelerate industrial transformation. To this end, the central government and local governments have issued a series of policies in recent years, proposing to vigorously develop prefabricated buildings. In February 2016, the State Council issued “Certain Opinions on Further Strengthening Urban Planning and Construction Management”, which aims to make prefabricated buildings account for 30% of newly built buildings in about 10 years. We believe that at present, prefabricated buildings are being promoted a lot in economically developed cities and regions, and will have great potential in the rural market in the future. Judging from the development of prefabricated townhouse enterprises in the market, prefabricated townhouses have already begun to show. Compared with competitors, the company currently has the highest degree of industrialization. We expect that Yuanda Meijia will quickly occupy the market with its advantages in construction industrialization.
2) The national layout of the factory is conducive to the widespread promotion of grand and beautiful homes
Like PC components for Yuanda Housing's 2B business, Yuanda Meijiao's prefabricated components are produced in directly-managed factories or affiliated factories. Due to the characteristics of the commencement of construction projects, the B-side business is generally in a low season in the industry in the first half of the year, and the utilization rate of factory production capacity is low during this period. However, the C-side directly connects with consumer demand, and orders are relatively stable throughout the year. We expect that the complementarity of B-side and C-side orders will further increase the overall capacity utilization rate.
As of April 30, 2019, Yuanda Housing has 15 wholly-owned PC factories and has contracted to invest in 85 joint factories. Currently, factories are spread all over the country, have achieved full coverage of the trillion-level GDP region, and the business covers more than 100 cities. The economic transportation radius of prefabricated PCs is about 150 kilometers, and the nationwide layout can help Yuanda Meizai's C-side rural market business develop rapidly. However, Huachuang Meizhai, which is also a prefabricated PC country house, currently has only seven factories in the country, and the layout is mainly in the north. Compared with townhouse enterprises with the same PC structure, the nationwide layout of production capacity provides a foundation for the large-scale promotion of Yuanda Meijia in the future.
3) The construction speed is leading the industry, and the product is cost-effective
Yuanda Meijiao has an obvious advantage in terms of construction time. All products use a fully assembled precast concrete structure system, and the main body is all prefabricated in the factory. The site is connected by high-strength bolts, and no cast-in-place casting is required. The overall hardcover delivery only takes 2 months, and the construction period is faster than that of heavy steel structures and unassembled structures.
In terms of product prices, the average sales unit price of Yuanda Meijia House is 4,052 yuan/㎡, which is higher than Baojia Township Villa (3,895 yuan/㎡), Yuanshu Home (2,863 yuan/㎡), and villa factory (3127 yuan/㎡), but lower than Huachuang Meijia with the same prefabricated concrete structure (4,565 yuan/㎡). The unit price of Huachuang Meizhai, which uses BPC technology, is higher than Yuanda Meijia. Currently, there are few product types, and the layout has not penetrated the whole country; since Baojiaxiang Villa's A-grade and X-grade products use a fully brick-mixed structure, the overall average sales price has been lowered, while the unit price of C-grade and E-grade products is higher than Yuanda Meizhai, and the price difference brought about by different processes is large. The original villa uses a brick-mixed structure, which is relatively low in cost, but the brick-mixed structure is not as good as the frame and PC structure in terms of insulation, moisture protection, noise reduction and sound insulation; the unit price of products in the villa factory is lower, but considering the issue of living comfort, currently the houses are mainly concrete structures.
Overall, we selected products with the same quality performance (Baojia frame structure, Huachuang Meijia BPC structure) and compared them, and found that Yuanda Meizhai is lower than Baojia and Huachuang Meijia in terms of product unit price. Therefore, we believe that Yuanda Meizhai is superior to products in the same industry in terms of cost performance ratio.
4) The hard-core advantages of the product help improve the quality and efficiency of beautiful homes
Yuanda Meizhai's fully prefabricated houses have been able to improve quality and efficiency, mainly because they have four major hard-core advantages. First, the components of the beautiful house are prefabricated by the factory, and the on-site installation is almost not affected by the weather, and the construction schedule is guaranteed; second, after the prefabricated building components are poured, the maintenance is completed in a constant temperature and humidity maintenance kiln, almost not affected by the outdoor environment, and the quality of the components is accurate and controllable; third, beautiful house exterior decoration is integrated, the interior decoration process is streamlined, material safety, and less pollution; fourth, beautiful house products have passed 1:1 physical simulation and earthquake resistance, and is suitable for almost all regions of the country. standards.
5) Richer customer group positioning
We believe that Yuanda Meijiao's customers can focus on three categories. The first category of customers is a high-income group that works in cities, and has a homestead in their hometown at the same time. In the future, they want to use a home base or parents who want to live in the countryside and need reconstruction and repair. Currently, other townhouse companies in the market target customers for this type of group; the second type of customers are urban people who have no homesteads but pursue an idyllic rural lifestyle. The company can connect with professional institutions to provide such customers with land information and create demand, thus realizing the vision of this type of customer to build a leisure holiday villa in the countryside; the third category of customers is a group that plans to build a leisure holiday home in the countryside; the third category of customers is a group that plans to build a leisure holiday home in the countryside; the third category of customers is a group that plans to build a leisure holiday home in the countryside; the third category of customers is a group that plans to build a leisure holiday home in the countryside; the third category of customers is a group that plans to build a leisure holiday home in the countryside; the third category of customers is a group that plans to build a recreational villa For enterprises with projects such as old-age care, etc., the company can expand with its resource advantages.
4. Pioneering online and offline Internet+marketing models
Currently, Yuanda Meizhai has carried out marketing model planning through both online and offline channels. On the online side, the company has built a one-stop online service platform “Meizhai Yuntai” with recommendations, sales, rebates, etc., to create an online business agent mechanism, establish sales performance commission incentives, cloud development incentives, new promotion and content dissemination incentives for agents, and encourage online business agents to actively promote and achieve sales and project implementation processes; offline, the company has set up display centers and 4S stores in major cities across the country to integrate local information resources, broaden offline marketing radiation, and connect with after-sales service.
4.1. Meizhai 4S Store: Enhancing Consumers' Offline Interactive Experience
A 4S store is a sales method that integrates the four functions of sales (sale), spare parts supply and sale (spareparts), service (service), and information feedback (survey). It has established close production and marketing relationships with various manufacturers. It has an adequate supply of spare parts, well-equipped and clean maintenance areas, an elegant and comfortable shopping environment, and a highly professional service management atmosphere, which can make customers trust the brand, thereby expanding market space.
Yuanda Meizhai learned from this operating model of the automobile industry and set up 4S stores in some regional cities across the country. The 4S store can play a role in regional storage and display of building materials and components, model house visits, company culture and brand image promotion, timely customer contact, interaction, and information feedback exchange. It is a good way for Yuanda Meijia to promote offline in the early stages.
The establishment and operation of 4S stores nationwide will be promoted by Yuanda Meizhai subsidiaries in cooperation with joint ventures across the country to achieve efficient and rapid nationwide coverage. At present, Yuanda Meizhai 4S stores have rapidly expanded in Jiangsu, Jiangxi, and Henan provinces: the number of dealers signed in the first month of June 2020 in Jiangxi Province reached 62, and the number of contracts signed by Yuanda Meizhai in Jiangsu Province has exceeded 100 as of July 8. At the same time, Yuanda Meizhai's national 4S dealers are still being recruited nationwide. We believe that in the future, with the full launch of Yuanda products, 4S store contracts will also usher in faster growth.
We believe that Meizhai has the following advantages in developing offline 4S stores:
1) Give full play to the advantages of “experiential marketing”. Experiential marketing means that a company enables target customers to experience a product or service by making target customers observe, listen, try, and test, etc., so that customers can perceive the quality and performance of the product or service, promote customer perception, preference, and purchase, and ultimately create a satisfactory exchange. Villa construction projects are mainly used for the customer's future personal residence, so the customer's subjective experience of the villa is critical to determining the final consumption behavior. The display of houses from construction to decoration in 4S stores can create sensory experiences and thinking approval for customers, create a living and cultural atmosphere, and provide a unique consumer experience. At the same time, customers are invited to visit the store to understand the different psychological needs of potential consumers and consumers from all over the world.
2) Facing urban customer groups, in line with product customer group positioning. The future market potential and market space are still very high for individual commercial enterprises developing leisure agriculture and the urban population with rural pastoral living needs. Urban residents started getting to know 4S stores early and have a better understanding and acceptance. In terms of marketing, customers can have better physical contact and experience with YuandaMei Real Estate products, thus enhancing the brand's awareness and promotion effectiveness within the city.
3) The existing resources are abundant, which can guarantee the contract management of 4S stores nationwide. Yuanda has a total of more than 20 subsidiaries and joint ventures nationwide. The joint factory covers East China, Beijing-Tianjin-Hebei, Pearl River Delta, central, western and northern regions. Promoting the 4S store dealer model in various regions has a basis for negotiations, cooperation, implementation, and later exchanges and management. The construction of 4S stores in cities across the country can publicize and radiate the cities and surrounding villages on a large scale.
4) 4S dealers are rich in local resources and efficiently accelerate the process of penetrating Yuanda Meimei Real Estate products into the local area. Beautiful home products not only have a broad base of urban customers, but the rural population building in rural areas is also the main customer base in the future. The 4S store distribution model is suitable for decentralized channels in remote and backward regions to achieve refined marketing. At the same time, dealers all over the world have better contacts, goodwill, and social relationships. Their localized and specialized distribution advantages enable Yuanda Meimei Real Estate products to achieve specialized and targeted marketing and promotion in various regions. Second, distributors' channel resources (including capital, personnel, sales networks, etc.) have relatively low costs and expenses, and have higher economic benefits under the same promotion and sales results.
4.2. Beautiful housing cloud generation: 0 cost, 0 threshold, high return
In 2020, the company built a one-stop online service platform “Meizhai Yuntai” with recommendations, sales, and rebates, etc., to create an online business agent mechanism and open up the terminal consumer market for rural housing.
The application method and daily responsibilities can be fully operated online. The specific steps are: enter the Yuanda Meizhai Cloud Agency Mini Program, enter the Cloud Agency registration interface, and follow the prompts on the interface to fill in information such as name, phone number, etc., to officially become a cloud agent. As a cloud agent, we carry out project promotion for grand and beautiful homes on a daily basis. According to the general process, after obtaining the consent of the intended customer, the intended customer leads are provided in the cloud agency system (including the name, phone number, address and area of the homestead, etc.). To promote Yuanda Housing's corporate culture and product content, post content related to Yuanda Housing on social platforms at least 2 times a week; accompany Meizhai customers to visit, follow up on customer project progress, assist in signing contracts, etc.
There are three main types of incentives for Meizhai Yuntai: commission incentives, cloud development incentives, new promotion, and content dissemination incentives. The main rules are as follows:
1) Commission incentives
Yundai, which directly motivates customers to do business with the company, can get a commission corresponding to the full price of the building for every sale of a beautiful property product (using the actual receipt of a 50% loan from the customer as the transaction standard). The calculation formula is as follows:
Commission = the total price amount of the building × the commission ratio corresponding to the accumulated sales amount at the time
The annual sales amount is calculated according to the natural year, that is, from the date the Cloud Agency contract is signed to December 31 of the same year (2020 sales are not calculated separately, but incorporated into 2021 sales), and the system automatically clears the previous year's sales data on January 1 of each year (except January 1, 2021). Furthermore, at the end of the year, the total sales amount for that year is calculated and the commission difference due to the increase in sales stars is made up according to the corresponding commission ratio.
2) Incentives for the development of Yundai
Each cloud agent can develop 300 direct cloud agents. For each direct cloud agent that facilitates a customer transaction for a beautiful house (based on actually receiving 50% of the loan from the customer as the transaction standard), the developers can increase the number of development quotas by another 30. For every beautiful house sold by a direct cloud agency, the direct developers of the cloud agency can receive a Kola Award of 5,000 yuan, and indirect developers can receive a Kole Award of 1,000 yuan.
Also, it should be explained that the Kola Award implements a nurturing relationship (A-B-C development line). A develops B, B develops C, and C trades for 1 building. C receives a commission corresponding to annual sales, B can receive 5,000 yuan of the Bole Award, and A receives 1,000 yuan of the KDL Award. The above Bole Awards are limited to the first order of C
3) Incentives for promotion and content dissemination
If you develop Cloud Generation and distribute content, you can participate in monthly cash envelopes or mobile phone sweepstakes for high-end brands. The more people who develop Cloud Generation and the number of times content is distributed, the higher the probability of winning the lottery. If you have the chance to draw 3 times a month, you can get a cash bonus of up to 1,888 yuan/Huawei phone worth 8,000 yuan.
We believe that Meizhai Yundai has the following advantages:
1) It is suitable for a scattered group of housing construction customers. Currently, the marketing targets of Yuanda Meimei Housing can be divided into three categories: rural middle- and high-income farmers who need to improve their living conditions, commercial individuals and enterprises developing leisure agriculture, and the urban population with rural housing and leisure needs. As the main subjects of rural housing construction at present: local residents in townships, their distribution is characterized by concentration in individual villages and towns, dispersion and differentiation between villages and towns. There are group transmission and driving effects within the same village, but the transmission efficiency between villages and towns is low. In the offline marketing model, village to town point by village will lead to a higher consumption of human, material, and financial resources. Within the urban market, customers with housing construction needs are also scattered. Cloud agents can reach deep into potential customer groups and use personal relationship resources to achieve decentralized and accurate marketing coverage.
2) Similar to the emerging UGC content+social marketing model in the era of big data, breaking the early transmission relationship in the marketing communication process. Agents of Meizhai Yundai are easy to apply for and come from a wide range of sources. Agents have different marketing perspectives and personal preferences. Meizai Rules Cloud Agents post content on social platforms every week to ensure the activity of the Yuanda Meizai brand on online social networking platforms. It can even attract end consumers to directly participate in the agency, put their personal housing construction experience on the market with innovative content, become a reference for other consumers, and influence their consumption decisions. At the same time, in the face of unspecialized individual customers, personal agents can make up for the difference between the professional team's perspective on the product and the customer's perspective, and share consulting information from more angles more kindly with customers to form an interactive advantage, suitable for C-end customers.
4.3. Optimistic about the future market space of Yuanda Meijiao, and the scale is expected to grow rapidly
Since the design style, appearance, and layout of the product are aspects that consumers focus on, we believe that as Yuanda Meijiao's products gradually become richer and design styles become more diverse, it will further enhance the consumer's sense of experience and attract a wide range of people to buy beautiful homes. As can be seen, since 2020, Yuanda Meizhai has successively released 5 products, of which 3 were released in the second half of the year. It is expected that the product range will be further enriched in the future.
However, the company should also pay attention to perfect standards for project implementation. For the scattered C-side business, while continuously expanding the scale of sales management across the country, Yuanda Housing also needs to integrate more social resources to ensure the completion of on-site infrastructure projects, on-site hoisting, decoration and maintenance, etc. For example, component elevators in buildings can be implemented by installers all over the country through the joint partner Mitsubishi Elevator, but at the same time, Yuanda will also ensure that the level of professional competence of workers from partner suppliers in various regions has been certified by Yuanda Service Teams and is subject to extensive supervision and management during operation, so that Yuanda Mei Real Estate products arrive with great quality assurance while sharing business.
According to the “White Paper on Consumption Data and Development of China's Rural Self-built Housing Industry”, the entire rural market in China will build 5 million new houses every year, mainly for personal use, while the rest will be occupied by cultural tourism and health care themed projects. It is expected that the company will develop rapidly in the prefabricated townhouse segment. In the future, the product type design will satisfy the entire market. In the long run, the 2C scale will not be lower than the 2B business. Moreover, from the perspective of business operations, the 2C business has better controllability and guarantees better cash flow and receivables. Therefore, the obvious advantages of the 2C business are also an inevitable trend for Yuanda Housing to strengthen the 2C layout in the future.
According to our forecast (neutral assumptions), the company's 2C business scale (excluding B-BOX) will reach 5.25 billion yuan in the next 3 years. The calculation formula is:
2C business scale (100 million yuan) = annual penetration rate of newly built homes in rural area×villa penetration rate×company 2C product penetration rate×average price per building
Here are the main assumptions:
1) Proportion of newly built homes in rural China: Every year, 5 million new housing units are built in rural China, mainly self-housing. Assuming that 70% of homes are built, we expect 3.5 million new housing units to be built every year.
2) Villa penetration rate: Due to the current low population density in rural areas, life has improved in recent years, so the proportion of villas in newly built housing has gradually increased (including self-built low-rise single-family houses). Assuming that the villa penetration rate is 3%, then 105,000 new villas are built every year.
3) The company's 2C product penetration rate: Yuanda Residential Construction's industrialization system is perfect, and the factory has formed a nationwide layout and has the ability to expand on a large scale. Assuming that the market penetration rate of 2C products is 5% in the next 3 years, the sales volume of 2C products will be 5,250 buildings per year.
4) Average price per building: Currently, the price of each beautiful house product is 88—3.98 million yuan. With the exception of Versailles, all other products are below 2 million yuan. Currently, most of them are Wutong Meijun (starting at 880,000 yuan) and Oak Manor (starting at 1.28 million yuan). Regardless of price increases for the next 3 years, let's assume that the average price of each building is 1 million yuan.
According to a comprehensive analysis, it is estimated that the company's 2C business scale (excluding B-BOX) will reach 5.25 billion yuan in the next 3 years, which will provide the company with considerable performance growth.
5. B-BOX: New modular construction products, parallel promotion and development at home and abroad
B-BOX is a modular building with new materials for overseas markets developed by Yuanda Housing at the end of 2019. After years of research and development results in Yuanda's materials laboratories, the product was basically improved in 2019. B-BOX and Yuanda Meijiao are important products for Yuanda Housing to achieve 2C business expansion.
At the beginning, the company's market plan for B-BOX was to focus on overseas markets, but due to factors such as the unstable political form of international trade in 2020, global production of public health events, and the slowdown in trade, etc., the company began to shift B-BOX to parallel promotion and development in domestic and foreign markets. The product is positioned at high-end quality, and is expected to be used in domestic mountainous country homestays, cultural tourism and vacation scenarios.
5.1. High-tech silicon-based composites create high-end residential space products
On September 25, 2020, B-box series products launched a new boxmodule I high-end residential space product with a living area of about 45 m², two living rooms, one room, one bathroom structure, and a complete hardcover delivery price of 158,000 yuan. In terms of product positioning, it has a wide range of uses, and can be used in country houses, tourist resorts, creative office space, beautiful rural construction, ecological cultural tourism towns, coffee shops, bookstores, etc.
In terms of material structure, high-tech silicon-based composites developed by Yuanda Materials Laboratory for more than 10 years are used. The material strength is 5 times higher than that of ordinary concrete, and the structural weight is lighter than water, making it easy to transport; in terms of technical process, millimeter-grade precision quality is used to create flexible and varied spaces. B-BOX products have wind resistance, shock resistance, insulation, and moisture resistance; in terms of floor construction, B-BOX can be assembled and built in one day and can be repeatedly disassembled and moved. Field work is mainly the integration and splicing of modules. In the splicing work, the exterior is bolted, and in the module plate splicing, flexible material adhesives are mainly used to achieve high-quality bonding effects.
B-BOX products use silicon-based composites. The production line process is quite different from PC factories. There are certain scale uneconomic problems, so they are not suitable for large-scale construction, but their weight is lighter than steel structures, and the road transportation radius of steel structure products is 1,000 kilometers, so the transportation radius of B-box products will be larger, and they can spread to most regions without building a plant nationwide. We believe that the location for B-BOX products should be located in the port area, making it easier for B-box products to be shipped to overseas markets. In addition to the fact that prefabricated buildings have certain preferential policies for export transportation, overseas imports, etc., the cost of shipping and land transportation will be reduced.
On September 11, 2020, the company announced the “Adjustments to the Proposed Issuance of A-Shares to Raise Capital Investment Projects”, which listed the company's intention to invest in the construction of Yuanda Housing's CPS Henan R&D and production headquarters base, Yuanda Housing Weifang Direct Company prefabricated PC factory, Yuanda Housing's smart construction site R&D project, Yuanda Housing Exhibition Center project, and Yuanda Housing's B-BOX modular construction production line technological transformation project. Among them, the proposed investment amount raised for the B-BOX modular construction production line technology transformation project is about 420 million yuan, accounting for 23.54% of the total amount of capital raised, accounting for the highest proportion of investment.
5.2. Analysis of competitive advantages at home and abroad
We believe B-BOX may become another heavyweight product in rural or overseas regions in the future. Its main advantages are as follows:
1) B-BOX is positioned as a high-quality cultural tourism and leisure themed construction project. Compared with other construction methods, the average cost is not very high. With the long-term development of the domestic economy and the increase in consumption levels, it is expected that high-quality cultural tourism and leisure buildings close to natural ecology will continue to expand their share in the industry. This development direction is just right for B-BOX's position and can bring more market space.
2) Currently, the quality and livability of resort hotels and homestays in most domestic leisure consumption fields is insufficient, and the quality and performance of housing is relatively poor, while the high performance and high quality characteristics of B-BOX can improve existing industrial business problems.
3) The advantages of rapid construction of B-BOX are suitable for commercial projects that pursue economic benefits, and complete construction in a shorter period of time to achieve profit.
4) For relatively affluent and developed countries and regions such as North America, Europe, and the Middle East, the houses are mainly fully prefabricated villas, and the B-BOX series of modular buildings fits the markets of such countries and regions. We believe B-BOX products have some competitiveness in overseas markets.
Also, with regard to the development of B-BOX products in overseas markets, we believe that we can draw on the development path of Southeast Asian construction technology unicorn startup Revolution PRECRAFTED. We analyzed RP in our previous report “RP Company for Construction and Technology: Prefabricated+Master Craftsman Design, Birth of the Second Unicorn in the Industry”.
As the first and only construction technology unicorn startup in Southeast Asia, RP has expanded its business to 31 countries in Asia, the Middle East, Europe, North America, South America, and the Caribbean with its novel positioning of “prefabricated+brand intelligence” and the core concept of “democratization of design.” The company is committed to completing business development plans in 85 to 100 countries around the world by 2020, promoting the company's core philosophy, achieving annual revenue of several billion US dollars, and listing in the US, UK or Singapore.
In terms of product differences, the RP concept “combining high-end design and brand prefabrication” and collaborates with world-renowned architects, artists, and designers to create two marketing points, greatly increasing the added value of prefabricated buildings. The B-BOX series, on the other hand, is a standardized product. It is positioned to use the budget of one car to build a villa, emphasizing economy and practicality. As can be seen from pricing, RP offers two types of homes: the first is a house designed by an in-house team, with prices ranging from $10,000 to over $100,000; the second type is a selection of homes designed by world-class designers, with prices ranging from $120,000 to $360,000. However, the price of the new B-BOX product is 158,000 yuan, and the added value of the design is relatively low. RP companies have formed a fairly obvious brand marketing effect, and due to product differences, the target customers and marketing promotion plans faced by B-BOX are different from RP.
We believe that the planning of B-BOX products in overseas markets can partly draw on the success path of RP companies.
1) RP's B2B2C model. The B2B2C model is different from the B2B model. The B2B model is a mode of business operation between enterprises. The B2B2C model usually refers to e-commerce enterprises building their own logistics supply chain systems to provide unified services. In the domestic market, B2B2C can be achieved through Tmall and JD; in overseas markets, drawing on RP's B2B2C model can reduce the inconvenience caused by differences in language, distance, and time zones of the B2C model and help develop overseas markets.
2) Targeted development of business areas can draw on the RP path. RP's regional development strategy is clearly positioned. The plan is to seek trustworthy developers as partners in Malaysia and China, and countries with abundant land resources for development. However, densely populated areas such as Singapore will not be the company's business focus, and Latin America is regarded as a potential growth area for the “prefabricated revolution” because there is a large amount of undeveloped land in the region, and various projects such as affordable housing projects, high-end villas, and luxury homes can be developed. However, B-BOX products themselves are more cost-effective and are expected to be more competitive in potential growth zones.
6. Profit forecasting and valuation
6.1. Profit forecast
At present, the company has formed a 2B+2C two-wheel drive model. Our revenue forecast assumptions are as follows:
Assume 1:2B-side PC component manufacturing business revenue will continue to grow in the next few years and gradually become a major component of 2B revenue
As of April 2019, Yuanda Housing has 15 wholly-owned PC factories and 55.5 PC component production lines. The company plans to locate three production centers in Wuhan, Jinan and Zhengzhou by the end of 2019, build production centers by the end of 2020, and expand the overall production capacity of six existing regional production centers in Hunan, Zhejiang, Anhui, Jiangsu, Tianjin and Shanghai. Assuming that each newly built factory has 3 PC component production lines and the expanded production capacity is double that of the previous one, the company will have 83 PC component production lines by the end of 2020. With the gradual release of production capacity, there is room for continued improvement in gross margin.
Assumption 2: The revenue scale of 2B-side PC production equipment manufacturing business continues to decline
As of June 30, 2020, the company has invested in a total of 62 joint factories, including 58 with production capacity. The company's ambitious joint plan has evolved from a rapid growth stage of rapid layout to a stage of quality growth that helps the joint factory improve its operational capacity and achieve healthy management. The expansion and construction progress of the joint factory and the PC production equipment manufacturing business have slowed down accordingly.
Assuming 3:2B general contracting business remains the same as the previous year, and business revenue remains around 200 million yuan
Assumption 4:2C Grand Beauty Real Estate Business Revenue will continue to grow in the next few years
The company said that in 2020, Yuandameizhai's new products will not be produced on a large scale for the time being. It plans to launch them on a small scale and then further expand production capacity after reaching a high level of market approval and acceptance. We expect that Yuanda Meijia will develop rapidly in the field of prefabricated villas. In the future, if product type design can satisfy the entire market, it is expected that there will be a lot of room for growth.
Assumption 5: In terms of cost ratio, since prefabricated factories mainly invest in early factory investment, and there is relatively little investment in personnel and technology in the later stages, the expenses in terms of three fees are relatively rigid, and there will be economies of scale. However, due to public health events in 2020, it is expected that the cost rate will decline slightly in the short term.
According to our forecast, the company's revenue in 2020-2022 was 5.255 billion yuan, 7.672 billion yuan and 10.590 billion yuan respectively, up 55.77%, 46.00% and 38.04% respectively; net profit was 884 million yuan, 1.156 billion yuan and 1,608 million yuan respectively, up 30.53%, 30.80% and 39.14%, respectively.
6.2. Relative valuation
We selected a prefabricated component manufacturing company with Wind's unanimous expectations as the target company, and Wind's unanimous expectations of October 9, 2020 as the 2020-2022 PE value, and used the relative valuation method to value the company.
In 2020, the company strategically laid out the 2C business, forming a 2B+2C two-wheel drive model. In terms of 2B, as a leader in the field of PC component manufacturing, the company's business has grown rapidly in recent years. At present, the domestic prefabricated market is dominated by PC structures and steel structures. In addition, PC structures have advantages such as lower cost and better living comfort compared to steel structures, we believe that PC structures will still dominate in the medium term, so the company still has a lot of room for development in the PC component business; in terms of 2C, the country house market space is vast, and the company has formed a nationwide factory layout, which is conducive to the widespread promotion of 2C products. Considering the company's leading position in the field of PC components and the future development prospects of the 2C business, we believe that the company still has a lot of room for improvement.
Due to the different valuation systems of AH shares, we discount the valuations of comparable A-share companies. Referring to the construction industry target where AH shares are listed at the same time, China Railway (H shares) has a valuation discount rate of about 0.65 compared to China Railway (A shares), China Construction International's valuation discount rate is about 0.90 compared to China Construction, and China Railway Construction (H shares) has a valuation discount rate of about 0.64 compared to China Railway Construction (A shares), with an average discount rate of about 0.73. After considering the discount rate, the company was given a valuation of 19.86 times PE in 2020. The target price was RMB 35.96 (corresponding to HK$41.09), maintaining the “buy” rating.
7. Investment advice
With the stimulus of rural collective land use, homestead and other policies, the company strategically lays out 2C business, forming a 2B+2C two-wheel drive model. We expect that Yuanda Meijia will develop rapidly in the field of prefabricated villas. In the future, if product type design can satisfy the entire market, it is expected that there will be a lot of room for growth. At the same time, the new product B-BOX may become another heavyweight product in rural or overseas regions in the future. In the long run, the 2C business scale is expected to be no less than the 2B business. Moreover, from the perspective of business management, the 2C business has better controllability and guarantees better cash flow and receivables. Considering that the 2C business will greatly boost the company's performance in the future, we adjusted the 2020-2022 EPS from 1.81, 2.17, and 2.60 yuan/share to 1.81, 2.37, and 3.30 yuan/share, giving the company a 2020 valuation of 19.86 times PE. The target price is 35.96 yuan (corresponding to HK$41.09), maintaining the “buy” rating.
8. Risk Alerts
1. In recent years, with the gradual introduction of national support policies for prefabricated construction, the prefabricated construction industry is fiercely competitive. With the entry of state-owned enterprises, the company may not be able to maintain its leading position in the market.
2. The implementation of the reform of the homestead system fell short of expectations. Currently, the rural self-built housing market space is predicted under policies such as a paid homestead introduction mechanism and household residency. If subsequent policies fall short of expectations, the forecast results of the rural self-built housing market will be biased.
3. The promotion of Yuanda Mei Real Estate was blocked. In 2020, Yuanda Meizhai's new product plan is to launch it on a small scale, actively collect market opinions on the product, and further expand production capacity after reaching a high level of market approval and acceptance. If housing quality problems occur due to improper construction management in the future, it will cause the promotion of beautiful housing products to be blocked.
4. As a result of public health incidents, B-BOX's overseas business was blocked. At present, most overseas countries are still in the stage of disrupted public health incidents, and a second outbreak has already occurred in some countries. If the impact of subsequent overseas public health events does not subside, it will hinder the development of B-BOX's overseas business.